It is not immediately clear why anyone would want to pay US$9 million for the desolate area of north-east Iceland known as Grímsstadir á Fjöllum, less still to invest another US$100 million or more building a luxury hotel and golf course.

Yet that is the intention of Huang Nubo, a Chinese tycoon and self-described poet and adventurer, whose provisional deal to buy 300 square kilometres of Icelandic wilderness has left many in the country searching warily for ulterior motives. Some suspect the former official in the Communist party’s propaganda department is a Trojan horse for Chinese strategic interest in Iceland. Halfway between Europe and North America, the country played a crucial role in north Atlantic security during the cold war and could take on renewed significance if global warming opens the nearby Arctic to oil exploration and shipping.

Huang says such conspiracy theories are unfounded. He has had ties to the country since sharing a room with an Icelandic student at Peking University and he fell in love with the place when visiting for the first time last year to sponsor a poetry festival. Sitting in his Beijing office, surrounded by memorabilia from his mountaineering expeditions, he says: “I thought it was so beautiful. I love wild, barren places.”

Yet, whatever his motives, the deal shows how China and its entrepreneurs are increasingly looking to exercise their growing financial muscle abroad. From African farmland and Chilean iron ore to French châteaux and Swedish car companies, Chinese investors are buying up land and resources around the world.

This signals a change from the growth model of the past few decades, which was heavily reliant on inbound foreign direct investment (FDI). China vied with the United States as the world’s top FDI destination for much of the past decade.

Until now, Beijing’s capital-controls have made it hard for Chinese business to invest overseas. But those restrictions are being eased and outbound direct investment has jumped from about US$15 billion in 2004 to more than US$220 billion by the end of last year, according to government estimates.

Even so, China still accounts for only 1.2% of total world FDI, about the same as Denmark. Though this is higher than that of emerging markets such as Brazil and India, it is only about one-twentieth that of the United States.

But by all accounts China is at the start of a global buying spree that will reshape the global economic landscape and probably the physical landscape, too.

Robert Zoellick, World Bank president, says the phenomenon could have benefits such as easing imbalances in global capital flows and encouraging internationalisation of the renminbi. “It’s a natural development for a growing economy that’s going to play a larger role in the international economic system,” he told the Financial Times. “I think this can actually be constructive.”

However, the uproar caused by Huang’s project highlights the suspicion facing Chinese investors overseas. The 55-year-old businessman says he was dismayed by global media reaction. He was en route to Tibet recently when he read that some Icelandic politicians had expressed concern. Until then, he says, he had heard only positive things in meetings with officials. “I’m just a businessman -- why does everyone think I have the government at my back?”

Dressed in sweatpants, he does not look the strait-laced apparatchik, nor is his office typical of a Chinese businessman’s. The lobby features sculptures inspired by his poems; crampons and oxygen tanks are lined up outside the meeting room. A litter of grey kittens runs around, vying for his attention. Upstairs, beside his bedroom, he keeps two monkeys, several parrots and a rabbit. He used to keep sharks but says they failed to thrive in Beijing.

Huang, who has climbed Mount Everest and reached the north and south poles, rejects any claim that his deal is motivated by strategic considerations. “It’s true that I have a government background. But I didn’t want to be a bureaucrat,” he says, stroking a purring kitten. “Could a bureaucrat keep cats in his office?”

Despite his eccentricity, in many ways he is typical of the growing ranks of tycoons looking to spread their wings beyond China. Having made his fortune in property, he owns leisure and tourism assets across the country, placing him 161st among its richest people, according to Forbes, with a net worth of US$890 million.

Until recently, most overseas Chinese investments have been in Asia, Latin America and Africa, as the state seeks to secure the natural resources needed to fuel its commodity-intensive growth engine. Today, while Chinese state-owned enterprises account for more than 70% of the country’s outbound FDI stock, according to government figures, smaller private companies and individuals are increasingly looking abroad, too. Natural resources remain central but Beijing is encouraging all domestic companies to compete in overseas markets and acquire skills and technology.

At the same time, Beijing is trying to maintain control over the targets of outbound investment to avoid any political backlash from overseas and stop its investors being seen as “dumb money”. It has blocked several deals by state-owned and private companies that did not fit prevailing industrial, political or macroeconomic policy. Huang admits his project could yet meet that fate, saying: “It’s possible that the Chinese government will not approve it, if they think it would impact China’s image abroad.”

Icelandic approval, too, is far from certain, as the country weighs the appeal of a big foreign investment in its troubled economy -- a victim of the financial crisis when its banking sector collapsed in 2008 -- against unease over Chinese influence.

Similar dilemmas face countries elsewhere. The developed world’s economic woes, combined with the seemingly relentless march of Chinese growth, have left many feeling vulnerable and wary of opportunistic investors swooping in to buy assets on the cheap.

In a recent report for the European Council on Foreign Relations, François Godement and Jonas Parello-Plesner voiced some of the concerns being raised in European capitals and in many other parts of the world. “Crisis-hit Europe’s need for short-term cash is allowing Chinese companies not just to strike cut-price deals but also to play off member states against each other and against their own collective interests -- replicating a strategy China has already used in the developing world,” the authors said.

They also voiced concerns about reciprocity that are widely held in countries with companies trying to crack the Chinese market. “The problem presented by Chinese direct investment in Europe becomes even clearer when one considers Europe’s limited access to similar opportunities in China,” they wrote. “In a nutshell, this means that China’s Geely can buy Sweden’s Volvo but Chinese regulations block the reverse.”

Back at Grímsstadir á Fjöllum, people living in the Icelandic area’s handful of small farms and guesthouses are reluctant to talk about Huang’s plans. One woman, peering around a half-opened door, says she is worried about the environmental impact of a big tourism project; but another resident expresses enthusiasm for the jobs it would create. Their requests for anonymity attest to the sensitivity of the subject in this tiny community.

Critics say this is naive. “You don’t need to buy 0.3% of Iceland to build a hotel,” says one prominent Reykjavik business leader.

For his part, Huang says the size of the area reflects the fact that multiple owners have pooled together to sell their land as a big bloc. Only a fraction of it is suitable for building on, he says. In addition to the hotel and golf course, his plans include hot-air balloon rides and horse stables. Guests will be flown in from Reykjavik to a small airstrip on two small planes he will buy. “It’s extraordinarily beautiful,” he reiterates. “Mankind’s last real vacation paradise.”
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Climate change is expected to transform the geography – and geopolitical weight – of the polar regions. In the first instalment of a three-part article, Linda Jakobson explores China’s growing interest in the thawing north.